Opportunity Zones: New Program to Incentivize Investment in Distressed Areas

The Basics of the Opportunity Zone Program

The new Opportunity Fund program was established by Congress in the Tax Cuts and Jobs Act of 2017 late last year. The purpose of the Opportunity Zone program is to encourage long-term investments in low-income urban and rural communities nationwide.

Through this new program, census tracts will be chosen to receive designation as “Qualified Opportunity Zones” (“QOZs”). They will be nominated by a state authority and submitted to the US Treasury for final approval and designation. Only census tracts that demonstrate economic distress are eligible to be nominated – and state authorities can only nominate 25% of eligible tracts. QOZs will retain their designation for 10 years. (More definitions, details, and discussion of caveats provided in a following post.)

Once the QOZs are established, development initiatives will seek designation as “Opportunity Funds” (“O Funds”). O Funds are expected to be businesses, projects, or other enterprises designed to promote economic development within their respective QOZs. The process for determining O Funds has not yet been established.

The incentive: investors in the O Funds get a temporary tax deferral on capital gains reinvested in an O Fund, as well as additional incentives for investors who hold their investments there for five or more years.

Want to Get a Census Tract Nominated for QOZ designation? Submit Your Input to Your State Authority within the Deadline

If there is an area that you think should be nominated as a QOZ, you’ll need to first confirm that it is eligible and then submit your input to your state authority within the deadlines. The state authorities face a deadline of March 21, 2018 (unless they request a 30-day extension); deadlines for submitting public input vary by state.

National Mapping Tools

US Treasury CDFI Fund National Map(Zoom in to see highlighted tracts meeting criteria; click the “Layers” tab in the upper-right corner to select datasets and if searching for LIC tracts or contiguous non-LIC tracts. Contact us if you have questions)